by Patrick O’Shaughnessy
My guest this week is Cathie Wood, the founder of ARK invest. Cathie and her team believe that disruptive innovation is the key to long-term growth and, therefore, alpha in the public markets.
Because their style of investing is entirely contingent on what will happen and change in the future, it is about as different a style as exists from the quantitative approach to investing, which relies on what is currently knowable about stocks and businesses.
The future is notoriously hard to predict, so I am always interested to hear about investing approaches which try to model or handicap the future and build portfolios against that work.
In this conversation, we explore all the most interesting and exciting technology trends at play in the world today—and how those trends may play out for investors. We discuss genome sequencing, blockchain, software 2.0, mobility as a service, automation, and more.
We also discuss Cathie’s take on building a bridge between the worlds of finance and Silicon Valley, and why starting with a benchmark is anathema to their process.
It is hard to deny Cathie’s passion and enthusiasm, and I credit her for building a unique firm culture that emphasizes openness and collaboration. Please enjoy our conversation on investing in innovation.
2:30 – (First Question) – Cathie’s idea of bringing open source to Wall Street
4:47 – Deep dive into the platform
6:09 – White Paper on Bitcoin – Could Bitoin serve as the role of money
7:43 – Why disruptive innovation is so inefficiently priced
10:04 – How well does the market discount cash flow of disruptive businesses
14:09 – A look at their investing strategies, starting with top-down.
16:10 – How they picked their 5 categories of technological change, starting with foundational
19:42 – Changes in energy
21:53 – Robotics
24:17 – Excitement over deep learning
28:03 – How they express their top-down ideas from the bottom up
36:06 – Mobility as a service as a key area of focus
45:25 – The power of public mistakes
46:39 – What she looks for when hiring
51:14 – her philosophy on building and maintain a portfolio
56:38 – Behind the growth of the company
1:04:01 – Most exciting area for her right now
1:07:52 – Kindest thing anyone has done for Cathie